Ridding the world of carbon emissions, blamed for climate change, can feel like an impossible task that might only be met decades from now, if ever. A few companies, however, have business opportunities right now that are moving the needle while helping improve sustainability.
Government officials, business leaders, and activists are in New York City to discuss climate change this week.
Heating ventilation and air conditioning, or HVAC, giant
Trane Technologies
(ticker: TT) is one of those companies. Heating and cooling buildings account for roughly 15% of global carbon emissions. Trane is focused on helping businesses lower that number.
One reason they are participating in the week’s events is to show “what technologies exist today that need to be scaling faster,” CEO Dave Regnery tells Barron’s.
The tech he’s referring to includes building automation as well as high-efficiency chillers and thermal energy storage. The latter sounds impressive, but it’s essentially an industrial-scale ice maker. Building managers can make ice during the night when electricity demand is low and use the ice to cool the building during the day.
The systems can lower a building’s operating costs while lowering peak electricity demand, easing pressure on the grid.
Thermal management integration into commercial buildings is one example of how sustainability-related business is helping Trane offset any headwinds from economic weakness. “You would argue that the [HVAC] markets in Europe have been flat for an extended period of time,” says Regnery. ‘Yet our commercial HVAC business in Europe was up high-teens [percentage increase] in the second quarter.”
Growth beyond what overall economic growth would imply isn’t expected to be the exception for Trane. Wall Street projects annual sales growth of between 5% and 6% in coming years, along with annual earnings growth north of 10%.
Solid growth like that is a reason shares trade for about 21.8 times estimated earnings projected over the next 12 months. The
S&P 500
trades for about 18.4 times.
Higher-than-average valuation is keeping Wall Street on the sidelines. About 36% of analysts covering the stock rate shares Buy. The average Buy-rating ratio of stocks in the S&P 500 is about 55%. The average analyst price target is about $216, about $13 higher than where the stock is trading now.
Through Tuesday trading, shares are up about 21% year to date and up about 28% over the past 12 months.
Write to Al Root at [email protected]
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